Banks link credit cards to e-payment platforms

Chinese mobile payment platforms Alipay and WeChat Pay have begun allowing users to withdraw money online through credit card cash advances by cooperating with some banks, such as Bank of Ningbo, China Everbright Bank and Ping An Bank.

Industry experts said the move will help raise the number of credit cards in use, make credit card users more active, and increase banks' business volume. They also called for more efforts to strengthen supervision of the use of funds after withdrawal.

The new function is now being tested on a limited scale. The amount of money that can be withdrawn from banks and at what interest rate is determined by the banks, and both Alipay and WeChat Pay will provide the service for free, according to the platforms' service agreements.

The funds withdrawn from customers' credit cards can only be transferred to debit cards linked to their e-wallets. In addition, Chinese regulators forbid cardholders from using cash withdrawn from credit card accounts to make debt payments or financial investments.

Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co Ltd, said, "Large internet platforms with a tremendous number of users will help raise card usage frequency and keep credit cards active."

The latest move is also a result of the rules recently announced by the China Banking and Insurance Regulatory Commission to further promote sound credit card growth, Dong added.

The CBIRC said in July the number of credit cards that have no transactions initiated by cardholders for over 18 consecutive months and whose current overdraft balance is zero should not surpass 20 percent of the total number of credit cards issued by a bank at any time. Banks exceeding the limit will not be allowed to issue new credit cards.

"What deserves regulatory attention is that it is hard for banks to monitor the flow of cash withdrawn from credit card accounts, which means that cardholders may violate regulations on the use of such funds," he said.

"Users often take out money from credit cards via automated teller machines or apps operated by the banks. The new function launched by e-payment companies will further diversify the product portfolio of third-party payment platforms and enhance user engagement," said Wang Pengbo, a senior analyst at market consultancy Botong Analysys. He added more efforts should be made to monitor how the money withdrawn from credit cards online is used.

Some banks saw declines in the income of their credit card business due to a slow recovery of consumption in China after COVID-19 outbreaks earlier this year. This also led to the latest cooperation on online cash advances between some banks and large internet platforms, Dong said.